Coming Soon: More Scandals.
By Theodore Kinni, November 28, 2005
In the 1990s, corporate America became “a two-bit securities scam.” That’s the premise of Pump and Dump, a comprehensive history of new-economy scandals, out this month from Rutgers University Press. Authors and sociologists Robert Tillman and Michael Indergaard posit that, in recent years, the two sides of Wall Street merged -- the one inhabited by big bankers, and the shady side defined by the “pump and dump,” the practice of promoting stocks just long enough to profit from them. (In one grisly example, the book tells of two online stock promoters who were murdered in a Mafia-style execution.) As Congress gutted industry regulations and investor protections over a period of 25 years, the seamy side became the norm. The power brokers behind WorldCom, Enron, and dotcom IPOs all embraced the pump-and-dump idea: Get rich by shifting risk to someone else.
The new-economy crash, the book concludes, had less to do with irrational exuberance than with the birth of a criminogenic business environment. Given loopholes in Sarbanes-Oxley and the organizational changes that still linger, the authors predict that new schemes will emerge. If you thought corporate scandals were history, Pump and Dump will make you think again.
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